Record Plc LON:REC, the London-based currency management company, has been quietly building value for its shareholders for over the past few years and ahead of the company’s interim results on Friday (17th November), The Armchair Trader looks at the company in more detail.
Established in 1983 by former Bank of England economist, Neil Record, who after experimenting on techniques that would replicate currency options on the soft commodities market at confectioner, Mars Corporation, decided that there might be a larger market for these ‘derivatives’, and founded an asset management company in his own name to service multinational corporate clients.
The industry’s first standalone currency hedge
The new company developed the theory of hedging and developed the industry’s first standalone currency hedge. Within five years the Record was managing USD3bn in assets and had become the largest independent currency manager in the world. Neil Record only stepped away from the company this year, when he stood down as non-executive chair in July
- HSBC vs NatWest: Which stock should you be banking on in 2025?
- Cohort expands global reach Down Under with new acquisition
- SRT Marine Systems secures $15m key contract
Today, Record has around USD85bn assets under management with offices in the UK, Germany and Switzerland and as well as providing corporate clients currency management services, also provides investment management and advisory services on a discretionary and non-discretionary basis and will portfolio manage Emerging Market Debt, Digital Lending, Private Credit, and infrastructure strategy funds, notes, and Separately Managed Accounts.
Record’s clients are drawn from pension funds, foundations and institutional investors and trades in derivatives, including options, futures x-currency, total return swaps, bonds and loans offering execution-only services as well as returns-seeking and arbitrage strategies.
- Stock recommendations by Bridgewise. Try a free trial of Data+ for a deeper look.
The trader’s performance is closely tied to its Assets Under Management Equivalent (AUME), as the more assets it manages, the greater the fees that it can charge and the greater profits it can generate (and dividends it can pay out). However in October, in Record’s 2Q23 update to end-September, the company reported its AUME has fallen marginally from USD86.4bn quarter-to-quarter to USD84.5bn and despite posting USD1.5bn net inflows for the quarter, USD1.5bn moved the other way due to negative forex movements and the financial services firm experienced USD1.9bn in losses on negative global market movements. All-in Record made GBP1m in performance fees in the quarter, with other fees being flat during the period.
Record diversifying into asset management and digital assets
One swallow does not make a summer, just as one quarter does not make a financial year, and although the last results were disappointing to both Record and its investors, the company, according to its CEO Leslie Hill is still progressing well with its diversification into asset management and digital assets, “albeit in places more gradually than initially envisaged”, she said.
Hill has, since joining, helped Record revive its fortunes. Since she joined in 2020, AUME has grown nearly 50% and revenue is up around three-quarters and profits growth is hovering around the 90% mark. In July management announced a 5.18p/share dividend a big step up from the 2.75p/share it paid out in 2020.
Currency management, especially passive hedging, is quite a specialist art, and many generalist fund managers are realising that it might be more prudent to outsource this function, than try to develop and maintain in-house. Record has been in the game for around 40-years and has plenty of room to expand into this specialist niche of financial services.
As the general economy falters, fund managers tend to increase their liquidity and cash positions, so although things might be gloomy in the real economy, in Record’s part of the ecosphere, there is robust growth and increasing strength. Over the longer term, Record could offer great growth potential, but we will have to see how its AUM has held up over the latest quarter on Friday. We add this stock to our ‘one to watch’ list.